Client and Operational Level Lessons From The Andhra Pradesh Experience – Part 1

The Financial Inclusion (Access) Paradigm:

By Ramesh S Arunachalam, Rural Finance Practitioner

The last few years have witnessed a repeatedly increasing emphasis on inclusive finance and this note attempts[i] highlight various aspects with regard to this financial inclusion paradigm, based on the Indian and especially, Andhra Pradesh micro-finance experience

Let us first look at the scope of the financial inclusion paradigm, as it is currently practiced in India today and this takes us to the first lesson learnt from the present micro-finance crisis.

Lesson # 1:
As evident from Box 1 below, the scope of current inclusive finance practice is rather narrow – while its intentions (like the report of the Financial Inclusion committee and other policy pronouncements) may have been to provide low income clients with access to a wide range of need based financial services, in reality, the inclusive finance (or financial inclusion) paradigm has mainly led to the proliferation of credit and primarily consumption loans, although there have been some small production/livelihood loans.

Financial Inclusion in India

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inclusive finance india

Given the huge focus on consumption loans and peripheral interest (on a relative basis) in small production and livelihood loans (as well as other products), it seems important to set the record straight with regard to access to this kind of credit. That is the main focus of this post…

In simple terms, access to credit seems to work well at certain levels and I would peg that in the range of Rs 10,000 – Rs 15,000[ii] per client (and at most, < = Rs 25,000), where it is possible for families to use their total (household) sources of income and cash to service the formal/semi formal debt.

Undoubtedly, at this level, for several clients and their families, apart from serving consumption needs, this access to credit, has had some impact[iii] including the following:

Read the rest on the Microfinance in India Blog

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